Hiring Employees in Georgia: What Founders Should Know
Most founders in Georgia start alone, then hire a freelancer, and at some point the person doing the work starts to look like an employee. The step to a proper payroll is smaller than it sounds, but it comes with obligations that do not exist while you are working solo: tax withheld from every salary, pension contributions, a written contract and rules on leave and termination that the law applies whether or not you put them in the contract.
Employee or Contractor: Get This Right First
Before payroll, the question is whether the person is an employee at all. Working with an independent contractor who invoices you is a very different arrangement from employing someone, and Georgian authorities look at how the work is actually done, not at what the agreement is called.
A person who works fixed hours set by you, uses your tools, follows your instructions and works only for you looks like an employee even when they invoice you as a freelancer. If that is reclassified, the tax and contribution position is rebuilt as if they had been on payroll from the start.
Paying a full-time team member as a contractor to avoid payroll is a common first mistake. If the arrangement is reclassified, the employer is the one exposed to the missing withholding, contributions and any penalties.
If the person really is independent, keep it that way in practice: their own tools and hours, a defined deliverable, and freedom to work for others.
What an Employer Withholds and Pays
| Item | How it works | Worth knowing |
|---|---|---|
| Income tax | A flat 20% is withheld from each salary payment by the employer and paid over to the Revenue Service | There are no tax bands. The employer is responsible for the withholding even if the employee never sees it |
| Employee pension | 2% of salary is withheld from the employee and paid into their individual pension account | Applies to covered employees only, see the foreign hires section below |
| Employer pension | The employer adds a matching 2% | This is a cost on top of the agreed salary |
| State pension top-up | The state adds a further share: 2% for annual pay under 24,000 GEL, 1% from 24,000 to under 60,000 GEL, 0% above that | It does not cost the employer anything, it only shows what goes into the account |
| Registration and reporting | The employer is registered with the Revenue Service and reports and pays withholding electronically every month | Confirm the monthly deadline on the Revenue Service portal |
The 1% rate under Small Business Status is a tax on your business turnover. It does not replace payroll withholding, so an Individual Entrepreneur with employees still withholds income tax and handles pension contributions for them. Our guide to choosing between a company and an IE explains how the two structures differ.
Pension for Foreign Employees
The pension scheme was designed around Georgian citizens and foreigners living in Georgia permanently. Guides agree that foreign employees who do not hold permanent residence are generally outside the mandatory scheme, and may join voluntarily. What none of them settle clearly is the position of an employee on a temporary residence permit. This should be confirmed for each hire before the first payroll, so that contributions are neither missed nor paid by mistake.
The Employment Contract
A contract can be agreed verbally, but once the employment is going to run beyond three months it has to be in writing. In practice a written contract from day one is the only version that is easy to prove, and it protects the employer as much as the employee.
| Point | What the law says | What to put in the contract |
|---|---|---|
| Probation | One probation period of up to six months, which must be in writing | The exact length, and that it is a probation period |
| Fixed term | A fixed-term arrangement that runs beyond 30 months, or is renewed repeatedly, becomes open-ended | Use a fixed term only for a genuine temporary need, and check the rules first |
| Pay | Salary must be paid at least once a month | Gross amount, payment date, and whether the stated figure is before tax |
| Duties and hours | The standard working week is 40 hours | Role, place of work, normal hours and how overtime is agreed |
| Termination | Notice and final payments follow the law whatever the contract says | Notice period and the grounds the employer relies on |
Working Time, Leave and Pay
| Topic | The general rule | Notes |
|---|---|---|
| Working week | 40 hours, with a break on any day longer than six hours | The length of the break is agreed between the parties |
| Overtime | Hours over the standard week are overtime, paid at a rate the parties agree | Some groups cannot be required to work overtime without consent, including pregnant workers and parents of young children |
| Annual leave | At least 24 working days of paid leave plus 15 days of unpaid leave each year | The entitlement accrues after 11 months of service, and unused leave is paid out on termination |
| Public holidays | Employees are paid for public holidays | Work on a holiday is paid at an increased rate agreed by the parties |
| Late salary | Reported penalty of 0.07% of the unpaid amount for each day of delay | Wording and rate should be confirmed against current rules |
Ending Employment Without Creating a Dispute
Termination is where employers in Georgia most often get into trouble, because it needs a lawful ground and cannot simply be an at-will decision. Where the employer ends the contract, the usual route is 30 calendar days of written notice and a payment of at least one month's salary. A faster route, with only a few days' notice, exists but costs more in severance, so it is not a way of saving money.
Whatever the ground, the final settlement is due within seven calendar days of termination, and any unused paid leave has to be paid out in proportion to the time worked. An employee who resigns generally gives 30 calendar days of written notice, unless the contract provides otherwise.
A termination that has no documented ground, or whose ground cannot be shown, is the one most likely to be challenged. Put the reason, the notice and the settlement figures in writing, and keep the evidence on file before the conversation happens, not after.
Hiring a Foreigner
If the person you want to hire is not a Georgian citizen, there is a second question before payroll: whether they can legally work for you. Foreign nationals working in Georgia are subject to the labour migration rules, and the requirements depend on the person's status, the nature of the role and where the employer is established. Our guides to the work permit rules for foreign entrepreneurs and to the new work residence permit rules cover what applies and when an exemption may be available.
Six Steps to a Clean First Hire
Decide whether the role is employment
Look at the real working arrangement. If it will be fixed hours, your instructions and one employer, plan for payroll rather than an invoice.
Check who can work for you
Georgian citizens and permanent residents can start straight away. A foreigner needs the right to work confirmed first, and for a foreign hire the pension position needs checking too.
Register as an employer
Make sure your business is set up with the Revenue Service for payroll reporting before the first salary is paid.
Put a written contract in place
Cover probation, gross pay, working hours, leave, notice and the termination grounds. Sign it before the first working day.
Run payroll correctly from the first month
Withhold 20% income tax and the employee pension share where it applies, add the employer pension share, and report and pay every month on time.
Keep records for leave and termination
Track leave taken and owed, hours and any warnings. These records are what you rely on if the employment ends badly.
Legal Vista is a Georgian corporate law firm that has served expatriates since 2017. For founders hiring in Georgia we can prepare the employment contract, register you as an employer, take care of the monthly payroll declarations through our accounting team, and handle the work permit when the hire is a foreign national.
If you are planning to hire, reach out to us before the first salary is paid: info@legal-vista.com, or WhatsApp +995 599 848 487.
Frequently Asked Questions
Can an Individual Entrepreneur hire employees in Georgia?
Yes. An IE can employ staff. The employer still withholds income tax from salaries and handles pension contributions where they apply, because the 1% Small Business Status rate covers business turnover, not payroll.
Does a contractor become an employee if they work only for me?
They can. Authorities look at how the work is done, not at the label on the agreement. Fixed hours, your instructions and working for one client all point towards employment.
Is a written employment contract mandatory?
It is required once the employment is going to continue beyond three months. A written contract from the start is simpler and safer in any case.
How long can a probation period last?
Up to six months, and it must be agreed in writing. Only one probation period is allowed.
How much annual leave must I give?
At least 24 working days of paid leave, plus 15 days of unpaid leave each year. The entitlement accrues after 11 months of service, and unused leave is paid out when employment ends.
Do I pay pension contributions for a foreign employee?
It depends on their status. Guides say foreigners without permanent residence are generally outside the mandatory scheme, but the position of temporary residence holders is not settled in the sources we reviewed, so confirm it before the first payroll.
Can I dismiss an employee without giving a reason?
No. Termination needs a lawful ground. The usual route is 30 days of written notice and a payment of at least one month's salary, with the final settlement due within seven days.
